THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to any aspect of this Circular or as to the action to be taken, you should consult your licensed securities dealer or registered institution licensed to deal in securities, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your units in Champion REIT, you should at once hand this Circular, together with the accompanying form of proxy, to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. The Securities and Futures Commission of Hong Kong, Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this Circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Circular. Champion Real Estate Investment Trust (a Hong Kong collective investment scheme authorised under section 104 of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)) (Stock Code: 2778) Managed by CIRCULAR TO UNITHOLDERS IN RELATION TO (1) EXTENSION AND MODIFICATION OF EXISTING CONNECTED PARTY TRANSACTION WAIVER AND PROPOSED NEW ANNUAL CAPS FOR CERTAIN CONNECTED PARTY TRANSACTIONS AND (2) NOTICE OF EGM AND UNITHOLDER REGISTER CLOSURE Independent Financial Adviser to the Independent Board Committee of the REIT Manager, the Independent Unitholders and the Trustee Alliance Capital Partners Limited A letter from the Board is set out on pages 6 to 24 of this Circular. A notice convening the extraordinary general meeting ( EGM ) of Champion REIT to be held at Yat Tung Heen, 2nd Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong on Tuesday, 13 December 2016 at 3:30 p.m. is set out on pages N1 to N2 of this Circular. Whether or not you are able to attend and vote at the EGM in person, please complete and return the accompanying form of proxy to the registered office of the REIT Manager of Suite 3008, 30th Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish. 25 November 2016

2 TABLE OF CONTENTS Page CORPORATE INFORMATION DEFINITIONS LETTER FROM THE BOARD WAIVER EXTENSION AND MODIFICATION NEW ANNUAL CAPS DISCLOSURE AND INDEPENDENT UNITHOLDERS APPROVAL REQUIREMENTS RESTRICTIONS ON VOTING OPINION OF THE BOARD OPINION OF THE INDEPENDENT FINANCIAL ADVISER RECOMMENDATIONS EXTRAORDINARY GENERAL MEETING RESPONSIBILITY STATEMENT LETTER FROM THE INDEPENDENT BOARD COMMITTEE LETTER FROM THE INDEPENDENT FINANCIAL ADVISER NOTICE OF EXTRAORDINARY GENERAL MEETING N1 - i -

3 CORPORATION INFORMATION Champion REIT REIT Manager Champion Real Estate Investment Trust, a collective investment scheme constituted as a unit trust and authorised under section 104 of the SFO subject to applicable conditions from time to time Eagle Asset Management (CP) Limited Suite 3008, 30th Floor, Great Eagle Centre 23 Harbour Road Wanchai Hong Kong Directors of the REIT Manager Non-executive Directors: Executive Director: Independent Non-executive Directors: Trustee Unit Registrar Legal Adviser to the REIT Manager Independent Financial Adviser to the Independent Board Committee, the Independent Unitholders and the Trustee Dr. Lo Ka Shui (Chairman) Mr. Ho Shut Kan Mr. Ip Yuk Keung, Albert Mr. Lo Kai Shui Ms. Wong Ka Ki, Ada (Chief Executive Officer) Mr. Cha Mou Sing, Payson Mr. Cheng Wai Chee, Christopher Mr. Shek Lai Him, Abraham HSBC Institutional Trust Services (Asia) Limited 1 Queen s Road Central Hong Kong Computershare Hong Kong Investor Services Limited Shops , 17th Floor, Hopewell Centre 183 Queen s Road East Wanchai Hong Kong Baker & McKenzie 14th Floor, Hutchison House 10 Harcourt Road Central Hong Kong Alliance Capital Partners Limited Unit A, 15th Floor, Wing On House 71 Des Voeux Road Central Hong Kong - 1 -

4 DEFINITIONS In this Circular, the following definitions apply throughout unless otherwise stated: 2008 Circular the circular dated 16 February 2008 issued by Champion REIT to the Unitholders 2008 CPT Waiver the waiver from strict compliance with the requirements of Chapter 8 of the REIT Code granted by the SFC on 28 February 2008 in respect of certain connected party transactions of Champion REIT 2010 Circular the circular dated 30 November 2010 issued by Champion REIT to the Unitholders 2010 Extended Waiver has the meaning given to this term in the section headed 2016 Waiver Extension and Modification Background 2013 Circular the circular dated 21 November 2013 issued by Champion REIT to the Unitholders 2013 Extended Waiver has the meaning given to this term in the section headed 2016 Waiver Extension and Modification Background 2016 Extended and Modified Waiver 2016 Waiver Extension and Modification Board Champion REIT the resulting extended and modified 2013 Extended Waiver, if the proposed 2016 Waiver Extension and Modification is approved by the Independent Unitholders at the EGM has the meaning given to this term in the section headed 2016 Waiver Extension and Modification Extension of the 2013 Extended Waiver and New Annual Caps the board of Directors Champion Real Estate Investment Trust, a collective investment scheme constituted as a unit trust and authorised under section 104 of the SFO subject to applicable conditions from time to time Connected Party Transactions has the meaning given to this term in the section headed 2016 Waiver Extension and Modification Background connected person Directors EGM has the meaning ascribed to this term in the REIT Code the directors of the REIT Manager the extraordinary general meeting of Unitholders convened by and referred to in the EGM Notice - 2 -

5 DEFINITIONS EGM Notice GE Entities GE/SFK Connected Persons GE Holders Great Eagle Great Eagle Connected Persons Group Hong Kong Independent Board Committee Independent Financial Adviser Independent Unitholders the notice included in this Circular in respect of the extraordinary general meeting of Unitholders to consider and, if thought fit, approve the 2016 Waiver Extension and Modification and the New Annual Caps each of the subsidiaries (as defined under the SFO) of Great Eagle collectively, the Great Eagle Connected Persons Group and the SFK Connected Persons Group collectively, Top Domain International Limited, Keen Flow Investments Limited and Bright Form Investments Limited, all being wholly owned subsidiaries of Great Eagle and each being a significant holder of Champion REIT holding more than 10% of the total issued Units of Champion REIT Great Eagle Holdings Limited, a company incorporated in Bermuda with limited liability, whose shares are listed on the Main Board of the Hong Kong Stock Exchange (Stock Code: 41) any person who is a connected person of Champion REIT by virtue of its relationship (including but not limited to a director, holding company, subsidiary or associate company) with the GE Holders or the REIT Manager The Hong Kong Special Administrative Region of the People s Republic of China the independent committee established by the Board of the REIT Manager to advise the Independent Unitholders on the 2016 Waiver Extension and Modification and the New Annual Caps, comprising Mr. Cha Mou Sing, Payson, Mr. Cheng Wai Chee, Christopher and Mr. Shek Lai Him, Abraham, being all of the independent nonexecutive Directors of the REIT Manager Alliance Capital Partners Limited, a corporation licenced to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities as defined under the SFO and in its capacity as the independent financial adviser for the purpose of paragraph 10.10(p) of the REIT Code Unitholders other than those who have a material interest in the relevant transactions, within the meaning of paragraph 8.11 of the REIT Code - 3 -

6 DEFINITIONS Latest Practicable Date New Annual Caps Ordinary Resolution 22 November 2016, being the latest practicable date prior to the printing of this Circular for the purpose of ascertaining certain information contained in this Circular the proposed new annual monetary limits for the Connected Party Transactions for the years ending 31 December 2017, 2018 and 2019 respectively, as set out in the section headed New Annual Caps of this Circular a resolution of Unitholders passed by a simple majority of the votes of those present, whether in person or by proxy, and entitled to vote, where the votes shall be taken by way of poll, but with a quorum of two or more Unitholders holding at least 10% of Units in issue PMA Transactions has the meaning given to this term in the section headed 2016 Waiver Extension and Modification Modification of 2013 Extended Waiver to expand the coverage of PMA Transactions Potential PMA Transactions has the meaning given to this term in the section headed 2016 Waiver Extension and Modification PMA Transactions Potential Property Management Agreement(s) new property management agreement(s) to be entered into by members of the GE/SFK Connected Persons Group for the provision of the PMA Transactions Record Date 13 December 2016 REIT Code REIT Manager SEHK SFC SFK SFK Connected Persons Group the Code on Real Estate Investment Trusts issued by the SFC as amended, supplemented or otherwise modified for the time being Eagle Asset Management (CP) Limited, as manager of Champion REIT The Stock Exchange of Hong Kong Limited The Securities and Futures Commission of Hong Kong SFK Construction Holdings Limited, a company incorporated in Bermuda with limited liability the related trust and companies of SFK, or any person who is a connected person of Champion REIT as a result of its relationship with SFK - 4 -

7 DEFINITIONS SFO significant holder the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) as amended, supplemented or otherwise modified for the time being has the meaning ascribed to this term in the REIT Code Specified PMA Transactions has the meaning given to this term in the section headed 2016 Waiver Extension and Modification PMA Transactions Specified Property Management Agreement the property management agreement dated 26 April 2006 entered into between the REIT Manager and Eagle Property Management (CP) Limited Trust Deed the deed of trust constituting Champion REIT dated 26 April 2006 entered into between the Trustee and the REIT Manager, as amended by a first supplemental deed dated 5 December 2006, a second supplemental deed dated 4 February 2008, a third supplemental deed dated 9 March 2009, a fourth supplemental deed dated 23 July 2010, a fifth supplemental deed dated 13 March 2012 and a sixth supplemental deed dated 23 January 2015 as the same may be supplemented or amended from time to time Trustee Unit Unit Registrar Unitholder HSBC Institutional Trust Services (Asia) Limited, as trustee of Champion REIT one undivided unit in Champion REIT Computershare Hong Kong Investor Services Limited any person registered as holding a Unit % per centum or percentage Words importing the singular shall, where applicable, include the plural and vice versa and words importing the masculine gender shall, where applicable, include the feminine and neuter genders. References to persons shall include corporations. Any reference in this Circular to any enactment is a reference to that enactment for the time being amended or re-enacted. Any reference to a time of day in this Circular shall be a reference to Hong Kong time unless otherwise stated

8 LETTER FROM THE BOARD Champion Real Estate Investment Trust (a Hong Kong collective investment scheme authorised under section 104 of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)) (Stock Code: 2778) Managed by Directors of the REIT Manager: Non-executive Directors: Dr. Lo Ka Shui (Chairman) Mr. Ho Shut Kan Mr. Ip Yuk Keung, Albert Mr. Lo Kai Shui Registered Office of the REIT Manager: Suite 3008, 30th Floor Great Eagle Centre 23 Harbour Road Wanchai Hong Kong Executive Director: Ms. Wong Ka Ki, Ada (Chief Executive Officer) Independent Non-executive Directors: Mr. Cha Mou Sing, Payson Mr. Cheng Wai Chee, Christopher Mr. Shek Lai Him, Abraham 25 November 2016 To: Unitholders of Champion REIT Dear Sir/Madam, CIRCULAR TO UNITHOLDERS IN RELATION TO (1) EXTENSION AND MODIFICATION OF EXISTING CONNECTED PARTY TRANSACTION WAIVER AND PROPOSED NEW ANNUAL CAPS FOR CERTAIN CONNECTED PARTY TRANSACTIONS AND (2) NOTICE OF EGM AND UNITHOLDER REGISTER CLOSURE Reference is made to the announcement dated 25 November 2016 by the REIT Manager in relation to the proposed extension and modification of the 2013 Extended Waiver in respect of the Connected Party Transactions and the proposed New Annual Caps. The purposes of this Circular are to: (a) provide you with - 6 -

9 LETTER FROM THE BOARD information on the proposed 2016 Waiver Extension and Modification and the New Annual Caps; (b) provide you with further information as is necessary to enable you to make an informed decision on whether to vote for or against the Ordinary Resolution to be proposed at the EGM relating to the 2016 Waiver Extension and Modification and the New Annual Caps; (c) set out the recommendation of the Independent Board Committee to the Independent Unitholders relating to the 2016 Waiver Extension and Modification and the New Annual Caps; (d) set out the recommendation of the Independent Financial Adviser to the Independent Board Committee, the Independent Unitholders and the Trustee relating to the 2016 Waiver Extension and Modification and the New Annual Caps; and (e) serve notice of the EGM WAIVER EXTENSION AND MODIFICATION (i) Background As disclosed in the 2008 Circular, the REIT Manager had obtained the 2008 CPT Waiver from strict compliance with the disclosure requirements and the requirements for approval of Unitholders, under Chapter 8 of the REIT Code, in respect of certain categories of connected party transactions between Champion REIT and: (i) Great Eagle Connected Persons Group; and/or (ii) SFK Connected Persons Group (the Connected Party Transactions ). As disclosed in subsequent circulars and announcements, this waiver was extended on 15 December 2010 (the resulting extended waiver being the 2010 Extended Waiver ) and 10 December 2013 (the resulting extended waiver being the 2013 Extended Waiver ). Details of the Connected Party Transactions, the 2010 Extended Waiver and the 2013 Extended Waiver are set out in the 2008 Circular, the 2010 Circular and the 2013 Circular, respectively. (ii) Expiration of the 2013 Extended Waiver The 2013 Extended Waiver will expire on 31 December In accordance with the terms of the 2013 Extended Waiver, the 2013 Extended Waiver may be extended beyond 31 December 2016, and/or the terms and conditions of the 2013 Extended Waiver may be modified from time to time, provided that: (a) (b) (c) the approval of Independent Unitholders is obtained by way of an Ordinary Resolution passed in a general meeting of Unitholders; disclosure of details of the proposed extension and/or modification (as the case may be) shall be made by way of an announcement by the REIT Manager of such proposal, and a circular and notice shall be issued to Unitholders in accordance with Chapter 10 of the REIT Code; and any extension of the period of the 2013 Extended Waiver shall, on each occasion of such extension, for a period which shall expire not later than the third full financial year-end date of Champion REIT after the date on which the approval in (a) above is obtained

10 LETTER FROM THE BOARD (iii) Extension and modification of the 2013 Extended Waiver and New Annual Caps PMA Transactions As part of Champion REIT s core strategy, the properties of Champion REIT located in Hong Kong have been managed, supervised and marketed by Eagle Property Management (CP) Limited (a connected party and member of the Great Eagle Connected Persons Group), subject to the overall management and supervision of the REIT Manager, upon the terms of the Specified Property Management Agreement. Pursuant to the Specified Property Management Agreement, members of the Great Eagle Connected Persons Group have provided the following services for properties of Champion REIT located in Hong Kong: (a) (b) (c) Property management services. These services include co-ordinating tenants fitting out requirements, recommending third party contracts for the provision of property management services, maintenance services, supervising the performance of service providers and contractors, arranging for adequate insurance and ensuring compliance with building and safety regulations. Lease management services. These services include the administration of rental collection, management of rental arrears, initiating lease renewals and negotiations of terms with tenants to conclude the renewal. Marketing services. These services include the provision of marketing and marketing coordination services. The 2013 Extended Waiver covered (among other things) members of the Great Eagle Connected Persons Group providing the abovementioned services under the Specified Property Management Agreement (being the Specified PMA Transactions ). However, property management, lease management and marketing services provided by members of the Great Eagle Connected Persons Group under a new property management agreement or similar services provided by members of the SFK Connected Persons Group (being the Potential PMA Transactions ) are not covered under the 2013 Extended Waiver. Modification of 2013 Extended Waiver to expand the coverage of PMA Transactions As noted in Champion REIT s offering circular dated 11 May 2006, the Specified Property Management Agreement is intended to cover properties of Champion REIT located in Hong Kong only. Also, at the time it was agreed, Champion REIT s mandate was limited to the acquisition of mature properties and this was reflected in the terms of the Specified Property Management Agreement. In February 2008, Unitholders approved an expansion of the geographic scope of Champion REIT s investment strategy to allow overseas acquisitions, and the REIT Manager has recently observed an increasing trend for Hong Kong listed REITs to invest overseas. Further, in December 2014, Unitholders approved an expansion of the investment scope of Champion REIT s investment strategy to include property development and related activities

11 LETTER FROM THE BOARD Given the Specified Property Management Agreement was agreed in the context of mature properties in Hong Kong only, the terms of such agreement may not be suitable and/or market if Champion REIT makes an acquisition overseas and/or into a property development project in accordance with its revised mandate approved by Unitholders. Therefore, in connection with any overseas acquisition and/or properties resulting from property development projects, Champion REIT will likely enter into a new property management agreement with a member of the GE/SFK Connected Persons Group) for the provision of the same property management, lease management and marketing services, on terms to be negotiated in future having regard to the nature and location of the property to be managed. Having regard to Champion REIT's broadened investment mandate, the REIT Manager wishes to seek Unitholder approval to modify the 2013 Extended Waiver in respect of the property management services, marketing services and leasing services described above (the PMA Transactions ) so that it not only covers PMA Transactions provided under the Specified Property Management Agreement (being the Specified PMA Transactions) which already fall within the 2013 Extended Waiver, but also the PMA Transactions provided under Potential Property Management Agreement(s) (being the Potential PMA Transactions) which do not currently fall within the 2013 Extended Waiver. The REIT Manager only expects the Potential PMA Transactions to cover Potential Property Management Agreement(s) entered into in connection with overseas acquisitions and/or development projects. As a result of such modification to expand the coverage of PMA Transactions, Champion REIT will have the flexibility to engage any member of the SFK Connected Persons Group, in addition to any member of the Great Eagle Connected Persons Group, to provide PMA Transactions subject to the terms and conditions of the expanded waiver (including annual caps and limitations in respect of the Potential PMA Transactions in paragraph (l)) as set out in the section headed 2016 Waiver Extension and Modification - (iii) Extension and modification of the 2013 Extended Waiver and New Annual Caps - Proposed extension and modification of the 2013 Extended Waiver and New Annual Caps. Proposed extension and modification of the 2013 Extended Waiver and New Annual Caps In light of the above and the upcoming expiration of the 2013 Extended Waiver, the REIT Manager has made a submission to the SFC to seek an extension and modification of the 2013 Extended Waiver so that it: (i) applies for the three financial years ending 31 December 2019; and (ii) additionally covers the Potential PMA Transactions (the 2016 Waiver Extension and Modification ). As part of its submission, the REIT Manager has also proposed New Annual Caps for the extended period. The REIT Manager confirms that the conditions of the 2013 Extended Waiver will continue to apply to Champion REIT until 31 December 2016 (including, for the avoidance of doubt, the existing annual caps for the year ending 31 December 2016). The waiver conditions of the 2016 Extended and Modified Waiver will be as follows: - 9 -

12 LETTER FROM THE BOARD (a) Approval by Independent Unitholders Due approval by Independent Unitholders of Champion REIT and adoption of the Ordinary Resolution set out in the EGM Notice, without any material amendment thereto. (b) Extensions or modifications The 2016 Extended and Modified Waiver is for a period to expire on 31 December 2019 and may be extended beyond 31 December 2019, and/or the terms and conditions of the 2016 Extended and Modified Waiver may be modified from time to time, provided that: (A) the approval of Independent Unitholders is obtained by way of an Ordinary Resolution passed in a general meeting of Unitholders; (B) disclosure of details of the proposed extension and/or modification (as the case may be) shall be made by way of an announcement by the REIT Manager of such proposal, and a circular and notice shall be issued to Unitholders in accordance with Chapter 10 of the REIT Code; and (C) any extension of the period of the 2016 Extended and Modified Waiver shall, on each occasion of such extension, for a period which shall expire not later than the third full financial year-end date of Champion REIT after the date on which the approval in paragraph (b)(a) above is obtained. For the avoidance of doubt, any material change to the transactions covered by the 2016 Waiver Extension and Modification (including without limitation on the scope or nature of such transactions) as set out in this Circular and the announcement based on which the waiver is sought and granted must be approved by Independent Unitholders pursuant to the paragraph 1(iii)(b)(A) condition above, and details of the proposed changes shall be disclosed in the manner as referred to in the paragraph 1(iii)(b)(B) condition above. (c) Annual Monetary Limits The annual value of the Connected Party Transactions shall not exceed the respective annual monetary limits set out in the section headed New Annual Caps below. Provided that there is no variation to the terms and conditions governing the Specified PMA Transactions, whether during the term of the Specified Property Management Agreement or upon any renewal thereof or during the term of any such renewed agreement(s): (A) the fees payable to any member of the Great Eagle Connected Persons Group under the Specified Property Management Agreement will not be subject to the annual monetary limits referred to above in this paragraph for the purpose of the 2016 Extended and Modified Waiver; and

13 LETTER FROM THE BOARD (B) any entry into by Champion REIT of a renewed Specified Property Management Agreement during the waiver period (or any extension thereof pursuant to paragraph (b) above) will be exempt from all reporting, disclosure and Unitholders approval requirements under Chapter 8 of the REIT Code. (d) Disclosure in semi-annual and annual reports Details of the Connected Party Transactions will be disclosed in Champion REIT s semi-annual and annual reports, as required under paragraph 8.14 of the REIT Code. (e) Auditors review procedures The REIT Manager shall engage and agree with the auditors of Champion REIT to perform certain review procedures on all of the Connected Party Transactions in respect of each relevant financial year. The auditors shall then report to the REIT Manager on the factual findings based on the work performed by them (and a copy of such report will be provided to the SFC), confirming whether all the Connected Party Transactions: (A) have received the approval of the Directors of the REIT Manager (including the independent non-executive Directors); (B) are in accordance with the pricing policies of Champion REIT; (C) have been entered into in accordance with the terms of the agreements governing the transactions; and (D) the total value in respect of which has not exceeded the respective annual monetary limits (where applicable) as set out above. (f) Review by the independent non-executive Directors of the REIT Manager The independent non-executive Directors of the REIT Manager shall review the relevant Connected Party Transactions annually and confirm in Champion REIT s annual report for the relevant financial period that such transactions have been entered into: (A) in the ordinary and usual course of business of Champion REIT; (B) on normal commercial terms (to the extent that there are comparable transactions) or, where there are insufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to Champion REIT than terms available to or from (as appropriate) independent third parties; and (C) in accordance with the relevant agreement and the REIT Manager s internal procedures governing them (if any) on terms that are fair and reasonable and in the interests of the Unitholders as a whole

14 LETTER FROM THE BOARD (g) Auditors access to books and records The REIT Manager shall allow, and shall procure the counterparty to the relevant Connected Party Transactions to allow, the auditors of Champion REIT sufficient access to their records for the purpose of reporting on the transactions. (h) Notification to the SFC The REIT Manager shall promptly notify the SFC and publish an announcement if it knows or has reason to believe that the auditors and/or the independent non-executive Directors of the REIT Manager will not be able to confirm the matters set out in paragraphs (e) and (f) above. (i) Independent valuation for tenancy agreements and licence agreements An independent valuation shall be conducted for each of the relevant tenancy agreements with members of the Great Eagle Connected Persons Group and licence agreements with members of the Great Eagle Connected Persons Group, except where they are conducted on standard or published rates. In the case of such tenancy agreements or licence agreements with no fixed terms (for example, tenancies with monthly rollover), an independent valuation shall be conducted no less than once every 24 months. (j) Subsequent increases in annual caps with Independent Unitholders approval If necessary, for example, where there are further asset acquisitions by Champion REIT thereby increasing the scale of its operations generally, or where there are changes in market or operating conditions, the REIT Manager may, from time to time in the future, seek to increase one or more of the New Annual Caps, provided that: (A) the approval of Independent Unitholders is obtained by way of an Ordinary Resolution passed in a general meeting of Unitholders; (B) disclosure of details of the proposal to increase the cap amounts shall be made by way of an announcement by the REIT Manager of such proposal, and a circular and notice shall be issued to Unitholders in accordance with Chapter 10 of the REIT Code; and (C) the requirements referred to in paragraphs (c) to (i) above shall continue to apply to the relevant transactions, save that the increased annual monetary limits shall apply

15 LETTER FROM THE BOARD (k) Paragraph 8.14 of the REIT Code The REIT Manager shall comply with all requirements under paragraph 8.14 of the REIT Code where there is any material change to the terms of the relevant Connected Party Transactions or where there is any subsequent change to the REIT Code which may impose stricter requirements in respect of disclosure and/or Unitholders approval. Details of the Connected Party Transactions will be disclosed in the semi-annual and annual report of Champion REIT as required under paragraph 8.14 of the REIT Code. The independent non-executive Directors of the REIT Manager shall review the Connected Party Transactions annually and confirm whether such transactions are carried out in the ordinary and usual course of business of Champion REIT based on normal commercial terms and in accordance with the relevant agreement governing them on terms that are fair and reasonable and in the interests of the Unitholders. (l) Limitations on Potential PMA Transactions The REIT Manager shall ensure that the terms of any Potential Property Management Agreement shall only cover the same PMA Transactions as the existing Specified PMA Transactions and adopt the same terms as the Specified Property Management Agreement, unless inconsistent with the common market requirements applicable to the subject property having regard to its asset class, quality, stage of development and location, which therefore would necessitate a deviation from the terms of the existing Specified Property Management Agreement. The terms of the Potential Property Management Agreement shall be: (i) normal commercial terms carried out on arm's length basis, which are no less favourable to Champion REIT than terms available from independent third parties; (ii) carried out in the ordinary and usual course of business for Champion REIT; and (iii) fair and reasonable and in the best interests of Unitholders. In addition, an independent expert will opine on whether the scope of services and the fee scale under the Potential Property Management Agreement are reasonable and at market levels. Where the terms of the Potential Property Management Agreement do not comply with the limitations set out in (i), (ii) and (iii) above, or the independent expert cannot give the requisite opinion, the REIT Manager shall comply with Chapter 8 of the REIT Code and, if required thereunder, seek Independent Unitholders' approval for the Potential Property Management Agreement

16 LETTER FROM THE BOARD 2. NEW ANNUAL CAPS The REIT Manager has adopted a calculation methodology for the New Annual Caps which is different from and clearer than the one used in the 2013 Extended Waiver. The methodology involves calculating the actual amount of rental income / building management fees receivable (in the case of revenue transactions), and the projected amount of estate management transactions (in the case of expenditure transactions) in the years ending 31 December 2017, 2018 and 2019, and applying increments to such amounts as contingency buffers. By comparison, the methodology used in the 2013 Extended Waiver calculated an annual cap for the year ending 31 December 2014, and applied growth rates to such figure to determine the annual caps for the years ending 31 December 2015 and (i) Revenue transactions The types of transactions that fall in the category of revenue transactions is described in the section headed 2008 Continuing Connected Party Transactions Revenue Transactions in the 2008 Circular. The REIT Manager confirms that the types of revenue transactions in respect of which the 2016 Waiver Extension and Modification is sought are the same as those referred to in the 2008 Circular. It is proposed that the New Annual Caps for the financial years ending 31 December 2017, 2018 and 2019 for the revenue transactions shall not exceed the respective annual monetary limits set out in the following table. No change is proposed for the annual caps in respect of the financial year ending 31 December 2016, although the annual caps and actual transaction amounts in respect of the financial years ending 31 December 2014, 2015 and 2016 is set out below for ease of comparison. The differences between the annual caps and historic transaction amounts are due to the variables (taken into account in calculating the respective annual cap) differing from the REIT Manager's assumed levels

17 LETTER FROM THE BOARD Annual Caps New Annual Caps for the year ended 31 December 2014 for the year ended 31 December 2015 for the year ending 31 December 2016 for the year ending 31 December 2017 for the year ending 31 December 2018 for the year ending 31 December 2019 (HK$ 000) (HK$ 000) (HK$ 000) (HK$ 000) (HK$ 000) (HK$ 000) Rental income Annual caps 50,279 65,363 84,972 69,251 70,593 86,056 Annual cap year-on-year 30% 30% -19% 2% 22% increment Actual transaction amount 24,518 18,991 15,690 1 N/A N/A N/A Annual cap utilisation 48.8% 29.1% 18.5% 1 N/A N/A N/A Building management fee Annual caps 8,754 9,629 10,592 8,338 9,172 10,089 Annual cap year-on-year 10% 10% -21% 10% 10% increment Actual transaction amount 6,062 4,227 2,218 1 N/A N/A N/A Annual cap utilisation 69.2% 43.9% 20.9% 1 N/A N/A N/A TOTAL Annual caps 59,033 74,992 95,564 77,589 79,765 96,145 Annual cap year-on-year 27% 27% -19% 3% 21% increment Actual transaction amount 30,580 23,218 17,908 1 N/A N/A N/A Annual cap utilisation 51.8% 31.0% 18.7% 1 N/A N/A N/A Notes: (1) The transactions amounts for the year ending 31 December 2016 relate to annualised transaction amounts based on the actual amount for the period ended 30 June The proposed annual caps for the years ending 31 December 2017, 2018 and 2019 in relation to the rental income component have been determined in the following manner: (a) Using as a base the actual amount of rental income receivable in accordance with the terms of the subsisting connected party leases for the financial years ending 31 December 2017, 2018 and 2019, on the assumption that: (i) if any such leases are due to expire within such period, such leases are assumed to be renewed upon expiry; and (ii) an annual rental growth rate of 30% will be applied to determine the rental income payable under the renewed leases. The use of an annual growth rate of 30% is principally based on: (a) the high volatility of property rental rates in Hong Kong; (b) the potential increases in property rental rates of comparable Grade-A office buildings by reference to historical figures; and (c) the expected shortage of Hong Kong office spaces in future

18 LETTER FROM THE BOARD (b) Applying an increment of approximately HK$26,585,000 to the amounts resulting from paragraph (a) above, for each of the financial years ending 31 December 2017, 2018 and 2019, as a contingency buffer for new connected party leases to be entered into in respect of Champion REIT s existing portfolio. The amount of the buffer assumes one additional floor of Three Garden Road and one additional floor of Langham Place Office Tower will be leased to GE/SFK Connected Persons during the relevant years at the prevailing effective rent. (c) Applying a further increment of approximately HK$16,342,000 to the relevant amounts resulting from paragraph (b) above, for each of the financial years ending 31 December 2017, 2018 and 2019, to take into account any increased rental income as a result of future acquisitions that Champion REIT may undertake. This increment is based on an assumption that Champion REIT will acquire one or more properties in a single transaction from an independent third party during the waiver period which has a purchase price equal to 10% of the gross asset value (adjusted for dividend payable) of Champion REIT (as at the date of the latest published audited financial report). Such assumed purchase price has been estimated having regard to present market conditions, borrowing conditions and Champion REIT s investment mandate for property development and related activities. The future increment for rental income was then calculated assuming: (i) the acquired property has a gross rental income yield of 5% per annum; and (ii) 5% of the acquired property s gross rental income is attributable to GE/SFK Connected Persons, which the REIT Manager considers to be reasonable in light of current market conditions. For the avoidance of doubt, the above assumptions are solely for the purpose of calculating the New Annual Caps. There is no assurance that Champion REIT will acquire one or more properties during the waiver period, or that any properties to be acquired will have the abovementioned characteristics as to their size, development stage, gross rental income yield, rental profile or otherwise. Unitholders, as well as any prospective investors of the REIT, should be aware that the proposed annual caps are not indicative of Champion REIT s future acquisition strategy, and are therefore advised to exercise caution when dealing in the Units. The proposed annual caps for the years ending 31 December 2017, 2018 and 2019 in relation to the building management fees component have been determined in the following manner: (a) Using as a base the actual amount of building management fees receivable in accordance with the terms of the subsisting connected party leases for the financial years ending 31 December 2017, 2018 and 2019, on the assumption that: (i) if any such leases are due to expire within such period, such leases are assumed to be renewed upon expiry; and (ii) an annual building management fee growth rate of 10% will be applied to determine the building management fees for the financial years ending 31 December 2017, 2018 and

19 LETTER FROM THE BOARD The REIT Manager s use of an annual building management fee growth rate of 10% is to take into account any future asset enhancements of Champion REIT s existing portfolio that would result in the growth of building management fee income. (b) Applying increments of approximately HK$3,014,000 (for 2017), HK$3,315,000 (for 2018) and HK$3,646,000 (for 2019) to the amounts resulting from paragraph (a) above, as a contingency buffer for new connected party leases to be entered into in respect of Champion REIT s existing portfolio. The amount of the buffer assumes one additional floor of Three Garden Road and one additional floor of Langham Place Office Tower will be leased to GE/SFK Connected Persons during the relevant years, assuming an annual building management fee growth rate of 10% will be applied to determine the building management fees in respect of such additional floors for the financial years ending 31 December 2017, 2018 and (c) Applying a further increment of HK$1,961,000 (for 2017), HK$2,157,000 (for 2018) and HK$2,373,000 (for 2019) to the amounts resulting from paragraph (b) above, to take into account any increased building management fee income as a result of future acquisitions that Champion REIT may undertake. This increment is based on an assumption that Champion REIT will acquire one or more properties in a single transaction from an independent third party during the waiver period which has the same characteristics as described in the calculation methodology for the rental income annual caps as set out in paragraph (c) under the section headed New Annual Caps - (i) Revenue Transactions. The increment for 2017 shall be 12% (being the prevailing building management fee as a percentage of gross rental income) of the rental income increment for future acquisitions calculated above, with an annual growth rate of 10% for 2018 and (ii) Expenditure transactions The types of transactions that fall in the category of expenditure transactions is described in the section headed 2008 Continuing Connected Party Transactions Expenditure Transactions in the 2008 Circular. As mentioned above, the REIT Manager proposes to expand the expenditure transactions to add a new category for Potential PMA Transactions. The REIT Manager confirms that save for the addition of Potential PMA Transactions, the types of expenditure transactions in respect of which the 2016 Waiver Extension and Modification is sought are the same as those referred to in the 2008 Circular

20 LETTER FROM THE BOARD It is proposed that the New Annual Caps for the financial years ending 31 December 2017, 2018 and 2019 for: (i) the estate management transactions; and (ii) Potential PMA Transactions, shall not exceed the respective annual monetary limits set out in the following table. No change is proposed for the annual caps in respect of the financial year ending 31 December 2016 in respect of the estate management transactions, although the same is set out below for ease of comparison. Differences between the annual caps and historic transaction amounts are due to the variables (taken into account in calculating the respective annual cap) differing from the REIT Manager s assumed levels. Annual Caps New Annual Caps for the year ended 31 December 2014 for the year ended 31 December 2015 for the year ending 31 December 2016 for the year ending 31 December 2017 for the year ending 31 December 2018 for the year ending 31 December 2019 (HK$ 000) (HK$ 000) (HK$ 000) (HK$ 000) (HK$ 000) (HK$ 000) Estate management transactions Annual caps 127, , , , , ,427 Annual cap year-on-year 15% 15% 27% 15% 15% increment Actual transaction amount 104, ,686 91,830 1 N/A N/A N/A Annual cap utilisation 82.0% 80.4% 54.6% 1 N/A N/A N/A Potential PMA Transactions Annual caps N/A N/A N/A 37,042 42,599 48,989 Annual cap year-on-year 15% 15% increment TOTAL Annual caps 127, , , , , ,416 Annual year-on-year 15% 15% 49% 2 15% 15% increment Actual transaction amount 104, ,686 91,830 1 N/A N/A N/A Annual cap utilization 82.0% 80.4% 54.6% 1 N/A N/A N/A Notes: (1) The transactions amounts for the year ending 31 December 2016 relate to annualised transaction amounts based on the actual amount for the period ended 30 June (2) The reason for the relatively large increment is because the total annual cap for the year ending 31 December 2017 includes the annual cap for Potential PMA Transactions, whereas the total annual cap for the year ending 31 December 2016 does not (as such transactions are not covered under the 2013 Extended Waiver)

21 LETTER FROM THE BOARD The proposed cap for estate management transactions for the year ending 31 December 2017 has been determined in the following manner: (a) Using the projected amount of estate management transactions for the year ending 31 December 2016, being HK$121,276,000 (representing 72% of the relevant annual cap for the year ending 31 December 2016). (b) Applying an increment of 25% to the amount resulting from paragraph (a) above, as a contingency buffer. The use of a contingency buffer of 25% is to cope with possible new unforeseen events during 2017 which may result in additional estate management expenses, including but not limited to changes in market conditions and possible occasional increases in estate management transactions (such as for repair, renovation, promotion and future asset enhancement). (c) Applying an increment of 15% to the amount resulting from paragraph (b) above, as assumed growth in the cost of estate management expenses over the year. The use of an assumed annual growth rate of 15% is based on expected inflationary increases in the cost of building management and reinstatement works (such as increases in the cost of building materials and/or cleaning contracts), and the historical growth of such expenses. (d) Applying an increment of approximately HK$39,221,000 to the amount resulting from paragraph (c) above, to take into account the increase in building management fees as a result of future acquisitions that Champion REIT may undertake. This increment is based on an assumption that Champion REIT will acquire one or more properties in a single transaction from an independent third party during the waiver period which has the same characteristics as described in the calculation of the future acquisition increment for rental income as set out in paragraph (c) under the section headed New Annual Caps (i) Revenue transactions above. The increment shall be 12% (being the prevailing building management fee as a percentage of gross rental income) of the total projected gross rental income for the acquired property. The proposed cap for Potential PMA Transactions for the year ending 31 December 2017 has been determined in the following manner: (a) (b) determining the rental income for a proposed acquisition during the waiver period in the same manner as the calculation of the future acquisition increment for rental income in the section headed New Annual Caps Revenue transactions above; and basing the proposed cap on the aggregate of an annual leasing service fee of 3% and an annual marketing service fee of 1 month base rent, such fees being consistent with those charged under the Specified Property Management Agreement

22 LETTER FROM THE BOARD The proposed caps for the years ending 31 December 2018 and 2019 have been determined by applying an increment of 15% (in line with the growth rate used to calculate the 2017 annual cap for estate management transactions) to the proposed cap for the preceding year, as assumed growth over the year. (iii) Specified PMA Transactions The REIT Manager confirms that there has been no variation to the terms and conditions governing the Specified PMA Transactions, whether during the term of the Specified Property Management Agreement or upon any renewal thereof. On this basis and pursuant to the 2013 Extended Waiver, the fees payable under the Specified Property Management Agreement will not be subject to the annual monetary limits referred to therein, and the renewal of the Specified Property Management Agreement will be exempt from all reporting, disclosure and Unitholders approval requirements under Chapter 8 of the REIT Code. Accordingly, the value of the fees payable under the Specified Property Management Agreement has not been taken into account in calculating the proposed annual caps above. (iv) Historical transaction amounts The annual value of Champion REIT s Connected Party Transactions with Great Eagle Connected Persons Group and/or SFK Connected Persons Group for the past two financial years and for the six months ended 30 June 2016 have been published in the reports as follows: (a) (b) (c) the annual value of the Connected Party Transactions of Champion REIT for the year ended 31 December 2014 is disclosed in the annual report of Champion REIT for the year ended 31 December 2014 published on 20 March 2015, from pages 93 to 101; the annual value of the Connected Party Transactions of Champion REIT for the year ended 31 December 2015 is disclosed in the annual report of Champion REIT for the year ended 31 December 2015 published on 30 March 2016, from pages 98 to 104; and the value of the Connected Party Transactions of Champion REIT for the six months ended 30 June 2016 is disclosed in the interim report of Champion REIT for the six months ended 30 June 2016 published on 29 August 2016, from pages 22 to DISCLOSURE AND INDEPENDENT UNITHOLDERS APPROVAL REQUIREMENTS Pursuant to the 2013 Extended Waiver, the REIT Manager is required to issue an announcement and to issue a circular and notice to Unitholders in accordance with Chapter 10 of the REIT Code to seek Independent Unitholders approval to further extend the 2013 Extended Waiver beyond 31 December 2016, and/or to modify the terms and conditions of the 2013 Extended Waiver. Accordingly, the REIT Manager intends to seek the Independent Unitholders approval for the 2016 Waiver Extension and Modification and the New Annual Caps at the EGM

23 LETTER FROM THE BOARD 4. RESTRICTIONS ON VOTING Paragraph 8.11 of the REIT Code provides that where a Unitholder has a material interest in a connected party transaction tabled for approval at a general meeting, and that interest is different from that of all other Unitholders, such Unitholder shall abstain from voting. Further, under Paragraph 3.2 of Schedule 1 to the Trust Deed, where a Unitholder has a material interest in the transaction tabled for approval at a general meeting of Champion REIT, and that interest is different from the interests of other Unitholders, such Unitholder shall be prohibited from voting its Units at, or being counted in the quorum for, the general meeting. Pursuant to the REIT Code and the Trust Deed, by virtue of Great Eagle s material interest or deemed material interest in the 2016 Waiver Extension and Modification, the GE/SFK Connected Persons shall abstain from voting on the Ordinary Resolution to approve the 2016 Waiver Extension and Modification and the New Annual Caps. Great Eagle has agreed that it will abstain, and will procure each of the GE Entities to abstain, from voting at the EGM on the Ordinary Resolution to approve the 2016 Waiver Extension and Modification and the New Annual Caps, except pursuant to a proxy given by Independent Unitholders where a specific direction as to voting is given. So far as the REIT Manager is aware, as at the Latest Practicable Date: (a) Great Eagle was interested or deemed to be interested in 3,797,688,098 Units representing approximately 65.5% of the Units in issue; and (b) SFK, a connected person of Champion REIT pursuant to the REIT Code, was not interested or deemed to be interested in any Units. As at the Latest Practicable Date, to the best of the REIT Manager s knowledge, information and belief, after having made reasonable enquiries, the REIT Manager takes the view that, save as disclosed above, no other Unitholder is required to abstain from voting at the EGM in respect of the 2016 Waiver Extension and Modification and the New Annual Caps. 5. OPINION OF THE BOARD The Board (including all the independent non-executive Directors) confirms that: 1. in its opinion, the 2016 Waiver Extension and Modification and the New Annual Caps, and the basis for the New Annual Caps, are fair and reasonable and in the interests of Champion REIT and the Independent Unitholders as a whole; 2. in its opinion, each of the Connected Party Transactions subsisting as at the date of this Circular has been entered into: (a) in the ordinary and usual course of business of Champion REIT; and (b) on terms which are normal commercial terms at arm s length and are fair and reasonable and in the interests of Champion REIT and the Independent Unitholders as a whole; and